Remote Work Salary Adjustments 2026: The 20% Gap Between SF and Smaller Cities

According to Ravio, companies take three main approaches to location-based compensation for remote workers:

According to Indeed research, tech employees in high-cost cities like San Francisco earn 20% more than those in smaller cities for identical roles. The gap can be even larger for some companies.

GitLab, known for its transparent compensation model, publishes its location factors publicly. Their average location factor across all teams is 0.679—meaning the average employee compensation is 67.9% of what an employee in San Francisco would be paid.

• San Francisco: 100% (benchmark)
• New York: 95-100%
• Austin/Denver: 85-90%
• Other US cities: 70-85%
• Lower COL countries: 50-70%

According to SalaryCube, pay transparency laws are reshaping how companies handle geographic compensation. Jurisdictions like California, Colorado, and New York City mandate salary range disclosures in job postings—even for remote roles—with penalties up to $10,000 per violation.

The European Union's Pay Transparency Directive further requires employers to justify geographic pay gaps exceeding 5% for similar roles. This creates pressure for companies to document and defend their location-based pay policies.

There are two sides to the geographic pay debate:

Arguments for location-based pay:

• Reflects local cost of living and market rates
• Allows companies to hire globally without SF-level costs
• Someone earning $100K in Austin lives better than $130K in SF
• Competitive with local job market alternatives

Arguments against location-based pay:

• Same work should receive same pay
• Punishes workers for not living in expensive cities
• Undermines the 'location-independent' promise of remote work
• Creates perverse incentives (move to SF just for higher pay)

According to Payscale, remote workers can navigate geographic pay policies strategically:

1. Research the policy upfront — Ask about geographic pay tiers before accepting offers
2. Understand your tier — Know where you fall and what the ranges are
3. Negotiate on skills, not location — Emphasize specialized expertise that commands premiums regardless of location
4. Consider relocation timing — Some companies adjust pay if you move; understand the policy
5. Target location-agnostic companies — Some remote-first companies pay SF rates everywhere (Basecamp, Help Scout)

According to best practices, companies should be transparent about compensation models and clearly document how location impacts pay. If your company doesn't explain their policy, ask—transparency laws increasingly require disclosure anyway.